Mindful modernization in financial services
Create the financial institution of tomorrow without abandoning the business you’ve built
In the financial services and insurance industry, it’s easy to be overwhelmed by pressure to modernize, as well as pressure not to modernize. Moving into the future is essential — but not all outcomes are created equal.
Embrace mindful, holistic, and business-led modernization
It’s no secret that financial institutions rely heavily on mainframes — including 88% of the top 50 banks and 80% of the top ten US insurance companies. Yet mainframes can’t keep up with the recent explosion of regulations, along with higher consumer expectations. The one thing the industry can’t afford to do is stand still. Financial services and industry firms must embrace modernization while remaining mindful of risk. Planning each step separately or waiting until the last second won’t suffice. Instead, firms must plan and execute the entire modernization process as a holistic journey based on both business and technological fundamentals. This approach makes it possible to achieve industry-leading customer experience (CX) and security while preserving decades of essential business logic and taking advantage of large sets of historical data.
Mainframes must move forward
For all their power, mainframes are a drag on financial resources, innovation, and agility. Mainframes typically consume 70% of an IT department’s budget, according to Gartner. Plus, as mainframe experts age and retire, finding replacements is a major challenge. While cloud platforms are a key component of modernization, Forrester reports that mainframes have hindered nearly 50% of insurance firms from migrating to an agile, cloud-based dev system.
Many banks and insurance firms only touch the mainframe when absolutely necessary because they could disrupt core business processes.
Yet the longer the mainframe stagnates, the more outdated the company’s CX and security measures become and the gap with vanguards is widening.
To control risk while remaining agile and keeping up with constantly evolving threats and regulations, executives need a comprehensive plan to enter the modern era and design an incremental and iterative approach to build the banking and insurance platforms of the future.
Many banks and insurance firms only touch the mainframe when absolutely necessary because they could disrupt core business processes. Yet the longer the mainframe stagnates, the more outdated the company’s CX and security measures become.
The benefits of good partners and good planning
By planning your full transition away from the mainframe, you can track and protect essential business logic as you move from step to step. You can also apply the savings from each step of the journey to fund the next one. To maximize benefits and minimize risk, you should partner with a service provider that can:
1. Modernize apps to unlock immediate and long-term value enhancements
Your partner should be able to provide an analysis of the existing value chain and identify which domain and processes should benefit from a rewriting or the adoption of COTS.
Supported by banking and insurance business consultants, this top-down value chain and business-outcome driven transformation is fundamentally different from a pure technology modernization.
In complement with business enhancements (improved CX, new products, personalized services, more efficient back-office operations), modernizing your apps will increase your agility, support best practices like Agile DevOps as well as improve resiliency and cybersecurity.
2. Accelerate the adoption of cloud
The next step is to adopt the new target cloud-based infrastructures and move the mainframe off-site. Your partner should either offer its own private cloud infrastructure and/or work with a hyperscaler like AWS, Azure, or Google. If your partner has a strong relationship with the hyperscalers, you can migrate to high-availability zones for ultra-low-latency connections between mainframe and cloud applications. Migration can have a huge impact on your operations. It not only has the potential to reduce infrastructure costs, but also cuts energy consumption and leads to massive performance improvements.
3. Manage your mainframe in place, providing skilled resources and laying the foundation for future steps
Finding a partner capable of effectively managing your mainframe can quickly solve major problems. In industries like capital markets, banking, and insurance that rely heavily on mainframes, the risk of skill shortages is high, because mainframe specialists are taking early retirement or leaving the workforce — a dynamic accelerated by COVID-19. If your partner can provide access to skilled mainframe resources, you greatly reduce the risk of losing veteran mainframe programmers and operators that are becoming more and more difficult to replace. In addition, you can take advantage of your partner’s economies of scale and mainframe-as-a-service model— using those savings to reinvest in the next phase of the modernization journey.
A mindful modernization program will be structured around those three pillars, across the transformation journey. This is a true win-win approach with your partner which will enable you to benefit from the value of its ecosystem, size, influence and models to manage costs and risks.
A few key questions
There are a few important questions to ask before making decisions about your service provider partner. They must be proficient at every stage of the journey, but make sure to investigate their track record and partner ecosystem in the financial services business domain and technological areas. You should also ensure your partner can assume part of the risks with comprehensive SLAs, timelines, and outcomes. To avoid disruptions or surprises between steps, you need a cross-functional team with experience in every aspect of modernization. You should plan this in parallel with choosing a modernization partner, so they can provide team members as well.
Ready to go? Not quite. Here are a few important points to consider first:
Questions you must answer:
1. What core business logic do we need to preserve?
2. What value can we generate from a complete modernization journey?
3. Who should spearhead the modernization process? How can we consolidate cross-department support and create a cross-functional team?
Questions your partner must answer:
1. What level of risk are you willing to accept? How are those outcomes protected by the SLAs, timeline, and high-level goals we agree on?
2. What experience do you have running mission-critical infrastructure for financial institutions?
3. What is your track record with migrating mainframes?
4. What options do you have for hosting our mainframe? Do you work with hyperscalers, and if so, what benefits can we receive from that partnership?
5. Are you able to purchase the hardware and software we need at a lower cost than we could, and will you pass those savings on to us?
6. Do you offer consumption-based pricing? When we eventually shift away from the mainframe, do we immediately stop paying for mainframe services, or are there residual costs?
Take the first steps
Now that you understand the value of a mindful migration, you can get started. If you are interested to learn more about migrating from mainframe to the cloud, I encourage you to read our extensive documentation about mainframe modernization for financial services here: https://atos.net/en/lp/financial-services-modernization
Atos has deep experience helping financial institutions plan and carry out modernization journeys, and we would be glad to help answer any questions you have or help take the first steps on your journey.
By Jean-Pierre le Treut, Global Head of Cloud for Financial Services & Insurance
Posted on: January 12, 2023